Trading Update 5/12/14 – 5/16/14: A Look Back at 2012

Continuing to put in a heavy rotation of hours analyzing market movement…and it helped me understand why trading became trickier for me after what I felt was a relatively “straight forward” 2012 (key word is “relative” as 2012 was not exactly a walk in the park).

2012 was what I would call a year of long ball or “super” trends where the market made continuous extended moves either up or down. This would allow one to use longer term trend charts to capture these moves with little worry of the trend suddenly changing direction before moving a considerable distance. Compared to human behavior, it would be like watching a person leave the house in the morning on a weekday, and being able to guess that once they left for work, they would drive all the way to their workplace destination. I’m oversimplifying it, but the market in 2012 was essentially more predictable for the most part.

Things changed in 2013/2014 where the market has become increasingly volatile on the long term charts so that while they may eventually reach the same destination as before, the reversal movements are larger and much more extended than before. This leads to constant stop outs or worse due to these strong directional whips. Compared to human behavior, it would be like a person going to work and hitting the road so you think their next destination is work. Then about 1/2 way or 3/4 way to work, the person makes a violent u-turn and speeds back towards home.  Then when they get towards their house, they continue to speed past it, so you’re not sure where they are going, only to have them soon reverse wildly again and head back towards the direction of work. They eventually make it to work  but with their new more chaotic behavior, predicting their movements has become much more challenging.

So my focus has been on updating my techniques to adapt for this new behavior, which coincides with what I needed to do anyway- which is gain better mastery over the timing of my entries/exits.

Progress has been slow but steady- systematically making adjustments to account for market zigs and zags. The key here is being consistent with your methods. The market merely “looks” random, but it operates according to rules, albeit complex ones. If your system is consistent, it will also react in a similar consistent way with the market. The challenge is then reducing your system risk through trial and error.

Another positive week of system development progress yielding some market gains. Trading is an area where all your work is immediately scored by the market. Either it works and you make a profit, or it doesn’t and you don’t.

 

 

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